The small and medium units in Punjab, Haryana, Himachal and Chandigarh have joined hands to persuade the Reserve Bank of India (RBI) to understand the growing financial needs of small players. Punjab alone has over 200,000 small and medium units, which offer employment to a large number of people.
According to RM Khanna, chairman, MSME Council, CII (Northern Region), the full potential of SMEs cannot be realised in the absence of funds. The CII (Northern Region) invited J Sadakkadulla, regional director, RBI at its regional Headquarters at Chandigarh to apprise him about the issues faced by the SMEs. The issues will be taken up at a national-level meeting of RBI Directors in Mumbai in November.
Khanna said that his organisation suggested introducing star-rating as is done by Crisil. This will ensure that the lenders know the true financial standing of the borrower. The bringing in of foreign direct investment in SMEs will also become less cumbersome, he added.
He added the ministry of defence has introduced the new offset policy under which 30 per cent of the total value of an order above Rs 100 cr would need to be produced indigneously.
This has helped the SMEs in procuring orders, but funds access remains a constraint. He added that the other ministries were also contemplating introducing the same clause. This would mean more business for SMEs. So, it was imperative that financial institutions were there to help SMEs
“The association with SMEs has helped the power ministry hasten reforms, but the non-availability of funds inhibits the small players to graduate to the medium players”, said Khanna.
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Ashok Tandon, vice-chairman, MSME Council, CII Northern Region said the guidelines issued by the banks for SME lending should be monitored by the RBI and 20 per cent of the projected turnover should be the minimum lending to the SMEs.
Tandon explained that preferential credit allocation under Priority Sector Lending were fine as a basket, but the components in the basket were not getting a fair deal.
He suggested that under the periodic reviews by RBI, credit extended to SMEs should be paid special attention as this sector was one of the largest employment generators.
Reforms without regulation in the financial sector cannot fetch desired results, he added. As bank lending is the only debt instrument the SMEs can access, they want more transparency and support. The CII also wants a distinct policy for micro units at all levels. The meet was attended by senior industry representatives.